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SANTA CRUZ — The Illinois-based private investment group RoundTable Healthcare Partners has acquired Santa Cruz Nutritionals, a major producer of calcium-fortified gummy bears, multi-vitamin jelly beans and organic energy fruit jells.
“We are delighted to be owners and partners with management and all the employees who are all staying on,” said David Koo, a senior partner with RoundTable Healthcare Partners. “We expect to aggressively invest in business to support its growth.”
RoundTable was interested in Santa Cruz Nutritionals as the No. 1 provider of gummy-based supplement for children and the No. 2 player in the adult market, Koo said. The vitamin, mineral and supplement market is a growing rapidly and gummy-based supplements is “arguably the fastest growing segment within the vitamin market.”
Santa Cruz Nutritionals, which has “well in excess of $100 million” in sales and more than 190 employees, according to Koo,
While the children’s fortified gummy market is about 65 penetrated, the adult market, which could grow 15 times larger, is still largely up for grabs, Koo said. “We see great prospects for our company. The company is an innovator.”
RoundTable, an operating-oriented private equity firm, bought the company from Levine Leichtman Capital Partners, a private equity firm based in Los Angeles.
It is just the latest in a series of ownership transfers. The original company, Harmony Foods, was founded in 1968 and made a name for itself in packaged trail mixes, gummy bears and other confections. In 2006, the company sold its retail business and a plant in Indiana to Diamond Foods. Swander Pace Capital, a private investment firm based in San Francisco, acquired the company’s Santa Cruz-based wholesale functional food and candy business. Four years later, Levine Leichtman partnered with the management of the vitamin manufacturer to buy the company for an undisclosed price.
“Our investment in SCN has been extremely successful for LLCP, our partners and the company’s management team, providing a case study of our ability to work with exceptional management teams in the middle market to help grow their businesses,” said Lauren Leichtman, chief executive officer of the selling firm, in a prepared statement. “SCN’s growth has significantly exceeded our original expectations from when we made our investment in the company almost three years ago.” Leichtman said RoundTable was the right group to support SCN in its next phase of growth.
Although most of the details about the deal were not disclosed, RoundTable said it facilitated the successful completion of new credit line and a private placement of senior subordinated notes as part of the deal.
Mike Westhusing, the company’s chief executive officer, and Randy Bridges, Santa Cruz Nutritionals chief financial officer, will stay on in their positions at the company and serve on the company’s board of directors as part of the deal. They were not available for comment.
RoundTable is the perfect partner for the company, Westhusing said in a prepared statement.
“As we continue to capitalize upon growth opportunities utilizing the gummy dosage format, RoundTable’s operating expertise, particularly in the disciplines of quality, regulatory and manufacturing, will be a key asset for us to draw upon,” Westhusing said.
RoundTable currently manages $1.9 billion in capital, including three equity funds totaling $1.5 billion and two subordinated debt funds totaling $400 million. Lester Knight, a founding partner and co-chairman of RoundTable, will serve as chairman of the board of Santa Cruz Nutritionals.
“The gummy dosage formulation is extremely unique, in high demand and has significant room for growth,” Knight said. “Mike and Randy have capitalized on this opportunity by building SCN into a market-leading, high quality manufacturer of these products. We look forward to working with them and their team to expand upon their current product offering to take advantage of positive market growth trends.”
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Santa Cruz Nutritionals
WHAT: Manufacturer of confection-based nutritional delivery systems such as calcium-fortified gummy bears, organic energy fruit jells and multi-vitamin jelly beans for emerging nutraceutical markets. The company also produces non-fortified gummy snacks and jelly beans, including organic, allergen-free and sugar-free products.
HEADQUARTERS: 2200 Delaware Ave., Santa Cruz
BACKGROUND: Founded in 1968 by two local surfers, under the name Harmony Foods. The company marketed trail mixes and were one of the earliest companies to produce gummy bears.
LEADERSHIP: Michael Westhusing, chief executive officer
EMPLOYEES: More than 190.
INFORMATION: 831-457-3200; http://www.santacruznutritionals.com
REVENUES: More than $100 million.